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Following the final Trilogue negotiation that occurred in Strasbourg on 14th June, the ban on palm oil biofuels by 2021 which was voted by the European Parliament has been removed. Although media reports indicate a phase out for palm oil biofuels by 2030, this is not indicated in the Renewable Energy Directive (RED) text.

Instead, the EU Commission will determine a new methodology in 2019 to identify which biofuels, biomass and bio-liquids pose the greatest climate risk based on high carbon stock and indirect land-use (ILUC) criteria. The EU Commission will then recommend whether and how these high-risk biofuels will be phased-out.

The imports of any high-risk biofuels will be frozen at their levels of 2019 imports, while a phase out will occur in 2030.

The political agreement reached on June 14 includes a binding renewable energy target of 32% for the EU.  Following this, the text of the RED will be formally approved by the European Parliament and the Council.

Previously, on 17th January 2018, the European Parliament (EP) adopted a resolution that called for a ban on palm oil biofuels under the Renewable Energy Directive (RED) which would start in 2021. All other oilseeds will be allowed to be used until 2030, resulting in a clear case of discrimination and protectionism. This was not well received by oil palm producers, especially the two largest; Indonesia and Malaysia.

A day before the vote, more than a thousand Malaysian small farmers marched to the European Union’s Embassy in Kuala Lumpur, to condemn the EP’s discriminatory and vote against palm oil biofuels.

Those marchers represented 650,000 Malaysian small farmers who spoke with one voice to oppose the ban as their livelihoods were threatened by the EU’s Directive. The leaders handed a petition to the EU Ambassador in Kuala Lumpur and called on the EU to reject the proposals of the EP.

Dato’ Haji Aliasak Bin Haji Ambia, President of the National Association of SmallHolders (NASH) said, “Palm Oil has allowed the rural poor in Malaysia to develop our own land, lift ourselves and our families out of poverty, and take control of our own economic density. An EU ban on Palm Oil biofuels is an all-out assault against the hundreds of thousands of small farmers across Malaysia. The EU will force farmers into poverty, if it bans Palm Oil. NASH and Malaysia’s small farmers will not stand by while Europeans attempt to sell commercial products to Malaysians with one hand, while cutting off our economic lifelines with the other hand. It is unacceptable behavior: the Palm Oil ban must be stopped immediately.”

A digital campaign was launched through the Faces of Palm Oil, a joint project of the National Association of Small Holders (NASH), the Federal Land Development Authority (FELDA), the Dayak Oil Palm Planters Association (DOPPA), the Sarawak Land Consolidation and Rehabilitation Authority (SALCRA) and the Malaysian Palm Oil Council (MPOC) which seeks to advocate on behalf of Malaysian smallholders.

Not surprisingly, Malaysia and Indonesia were quick to state that a ban on palm oil breached World Trade Organisation (WTO) rules. This was further confirmed by a paper written by Hanna Deringer and Hosuk Lee –Makiyama from ECIPE (European Centre for International Political Economy)  – Europe and South-East Asia: An Exercise in Diplomatic Patience. They argued why a number of WTO disputes have been struck down on discriminatory features in various environmental laws throughout its history.

For the palm oil industry, although the ban has been defeated, there will be no slowing down as there will continue to be new accusations on social or environmental claims surrounding palm oil. While there is no specific mention of palm biofuels in the RED text, producer countries must remain vigilant as the EU will keep imposing new regulations on palm biofuels.

It is important, that the palm oil biofuels debate in the EU is also seen within the context of the EU – Malaysia Free Trade Agreement (FTA).  For Malaysia, this will create an opportunity to put forward, or resolve any future restrictions, curbs or discriminatory practices that may be imposed which affect our market access. This will arise as the EU determines the new methodology to identify crop based biofuels based on high carbon stock and indirect land-use change.

Adding the ILUC criteria sends a signal that EU will continue to find ways to curb exports from developing countries where oil palm planting has long been seen as a successful agriculture diversification strategy that has provided a sustainable income for small farmers who form a backbone of Malaysia’s rural economy.  The decision by the Malaysian Government to switch to oil palm, instead of depending on rubber has provided economic benefits to the country by generating income through foreign exchange earnings  and lifted many Malaysians’ out of poverty.

It is important for palm oil producers to keep a close look out if ILUC will be used as a future strategy to keep palm oil out of the EU market.

After all, the current RED already require producers to adhere to stringent sustainability criteria. Palm biofuels exported to EU is certified under the International Sustainability and Carbon Certification System (ISCC), a German developed international certification system. While the palm oil industry is prepared for any future challenges, the idea of an additional regulation is indeed troubling for producers.

Meanwhile, as the EU keeps imposing new criteria for palm biofuels, the Malaysian palm oil industry should continue to demonstrate that they will be prepared to meet these new challenges.


Belvinder Sron
Deputy CEO, MPOC

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